Notes- Concept of Enterprises- start-up ventures

Concept of Enterprises- start-up ventures

The entrepreneurial decision process results into a suitable and viable start-up. A start-up refers to new business enterprises.

Basic types of start-up ventures: One very useful classification system divides start-ups into three categories:

1.   Lifestyle firms- A small venture that supports the owners and usually does not grow.

2.   Foundation companies- A type of company formed from research and development that usually does not go public

3.   High-potential ventures- A venture that has high growth potential and therefore receives great investor interest.

4.   Gazelles Very high growth ventures

·         Life-Style Firms

A lifestyle firm is privately held and usually achieves only modest growth due to the nature of the business, the objectives of the entrepreneur, and the limited money devoted to research and development. This type of firm may grow after several years to 30 or 40 employees and may have annual revenue of about Rs. 10 Lakh. A lifestyle firm exists primarily to support the owners and usually has little opportunity for significant growth and expansion.

·         Foundation Companies

The second type of start-up—the foundation company—is created from research and development and lays the foundation for a new business area. This firm can grow in 5 to 10 years from 40 to 400 employees and from Rs. 15 to Rs. 30 Lakh in yearly revenue. Since this type of start-up rarely goes public, it usually draws the interest of private investors only, not the venture-capital community

·         High-Potential Venture

This type of start-up venture has high growth potential and therefore receives great investor interest and publicity. The company may start out like a foundation company, but its growth is far more rapid. After five to ten years the company could employ around 500 employees, with Rs. 20 million to Rs. 30 million in revenue. These firms are also called gazelles and are most important for the economic development of an area.